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Understanding the nature of structural change and the sources of economic growth of an economy, especially the relative importance of different industries, is essential for policy-making. This paper estimates industry contribution to economic growth in both Canada and the United States. It argues that industry contribution should be evaluated on the basis of the performance of an industry in terms of creating economic value relative to other industries. In particular, it calls for the quantity and the price effects, which is consistent with real GDP in the chained-Fisher index that values the industry more when its price rises and less when its price declines. This is an important departure from the traditional methodologies that consider only quantity effect. This paper shows that the contribution from demand-driven industries is significantly more than the finding based on traditional thinking. [ABSTRACT FROM AUTHOR]

This paper studies the patterns of government expenditure stimuli among Organisation for Economic Co-operation and Development ( OECD) countries during the Great Recession (2007-2009). Overall, we find that the USA net fiscal stimulus was modest relative to peers, despite it being the epicenter of the crisis, and having access to relatively cheap funding of its twin deficits. Of the 28 countries in the sample, the USA is ranked among the bottom third in terms of the rate of expansion of consolidated government consumption and investment expenditures. Contrary to historical experience, emerging markets had strongly countercyclical policy during the period immediately preceding the Great Recession and the Great Recession itself. Federal unions, emerging markets and countries with very high gross domestic product ( GDP) growth during the pre-recession period saw larger net fiscal stimulus on average than their counterparts. We also find that greater net fiscal stimulus was associated with lower flow costs of general government debt in the same or subsequent period. [ABSTRACT FROM AUTHOR]

Using simulations projecting Chinese economic growth into the future, this paper first examines when China will overtake the USA to become the largest economy. Demographic changes that affect economic growth are taken into consideration in these projections. China is expected to become number one sometime in the mid-2020s, unless its growth rate of gross domestic product per worker declines dramatically, à la the lost decade of Japan. Next, the paper examines whether China becoming the number one economy will mean its currency, the renminbi (RMB), will become the international key currency. According to the basket currency regressions during the period that Chinese currency was gradually appreciating against the US dollar from July 2005 to August 2008, it is shown that the RMB has already acquired a strong influence on the Asian currencies. This shows that the RMB is fast gaining the status of a regional anchor currency for a possible regional joint float. As the Chinese government proceeds with internationalization of its currency, the RMB is expected to gain in the ranking of other aspects of international currency, such as the store of value and the medium of exchange. [ABSTRACT FROM AUTHOR]

We examine the relationship between offshoring and the labor market in an occupational choice model of trade and endogenous growth where workers are employed on the basis of their individual skill levels. Trade liberalization leads to offshoring and reduces employment in the manufacturing sector. Displaced workers move into traditional and innovation sectors according to their skill levels, shaping real wages and aggregate productivity in the manufacturing sector. The paper aims to show how inter-sectoral labor market adjustments, highlighted by skill heterogeneity, could be a possible explanation for the simultaneous rise in productivity and reduction in real wages that have coincided with the sharp escalation of offshoring activities in the U.S. manufacturing sector since 2004. ( JEL F16, F23, J24) [ABSTRACT FROM AUTHOR]

SUMMARY One of the major challenges of empirical tax research is the identification and calculation of appropriate tax data. While there is consensus that average marginal tax rates are most suitable for studying the effects of tax policy on economic growth, because of data limitations the calculation of marginal tax rates has been limited to the USA and the UK. This paper provides calculations of average marginal tax rates for the four Scandinavian countries using the methodologies of Seater (1982, 1985) and Barro and Sahasakul (1983, 1986). Then, by pooling the newly calculated tax rates for the Scandinavian countries with the data for the USA and the UK, we investigate the effects of tax policy shocks on the per capita GDP growth rate. Our results suggest that an increase in average marginal tax rates has a negative impact on economic growth. Employing additive mixed panel models with penalized splines as estimation approach, we show that changes in tax rates have nonlinear effects. Increasing average marginal tax rates turn out to be the most distorting at relatively moderate tax rates. Copyright © 2013 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper empirically assesses whether monetary policy and its volatility affect real economic activity through their effect on the aggregate supply side of the macroeconomy. Analysts typically argue that monetary policy either does not affect the real economy (the classical dichotomy) or only affects the real economy in the short run through aggregate demand (new Keynesian or new classical theories). Real business cycle theorists try to explain the business cycle with supply-side productivity shocks. We provide some preliminary evidence about how monetary policy and its volatility affect the aggregate supply side of the macroeconomy through their effect on total factor productivity and its volatility. Total factor productivity provides an important measure of supply-side performance. The results show that monetary policy and its volatility exert a positive and statistically significant effect on the supply side of the macroeconomy. Moreover, the findings buttress the importance of reducing short-run swings in monetary policy variables as well as support the adoption of an optimal money supply rule. Our results also prove consistent with the effective role of monetary policy during the so-called ‘Great Moderation’ in US gross domestic product volatility beginning in the early 1980s. [ABSTRACT FROM AUTHOR]

ABSTRACT We reveal evidence that the US aggregate bank dividends exercise a causal impact on the US real GDP growth during the period from the introduction of the Prompt Corrective Action framework in 1992 until the outburst of the subprime mortgage market crisis in 2007. Over this period, the positive signalling effects of bank dividends outperform the negative effect of dividends on default risk. During the pre-Prompt Corrective Action and the recent post-2007 periods, bank dividends do not affect GDP growth. This regime-dependent relation is due to an asymmetric role of bank default risk. These findings are of interest to bank regulators in reassessing the role of bank dividends within Basel III and carry important policy implications as bank dividends constitute an important tool available to policy makers for strengthening real activity. Copyright © 2014 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Research and development (R&D) has a large effect on both state output and total factor productivity in the long run. Our estimates for the private sector of the U.S. states from 1963 to 2007 show that the R&D elasticity averages 0.056-0.143. The implied returns to state Gross Domestic Product (GDP) from R&D spending are 82-211%. There are also positive R&D spillovers, with 70-80% of the total returns accruing to other states. We also find that states with more human capital have higher own- and other-R&D elasticities, and those in lowest tier of economic development have the least own-state R&D elasticity but the highest other-R&D elasticity. In addition, we find that the positive effect of R&D spillovers across states is larger when we consider R&D spillovers across states based on economic similarity of R&D across sectors. [ABSTRACT FROM AUTHOR]

Objectives The literature typically undervalues the economy-wide importance of confidence, despite a renewed interest since the recent financial crisis in considering also psychological factors such as confidence. This study empirically assesses whether confidence matters for current real GDP growth in the euro area and the United States in addition to a widely applied and reliable predictor, the Purchasing Managers' Index. Methods We add confidence indicators to a regression of real GDP growth on the composite PMI output index and check for a different impact of confidence during recessions as opposed to expansions by applying smooth transition regressions. Results Confidence matters for economic growth, both in good and bad times. This result is robust across sample periods, models, and proxies for confidence. Conclusions Confidence is essential for assessing the current stage of the business cycle. Analysts should therefore closely monitor sentiment swings, whereas private and public decisionmakers can boost growth by improving confidence in the economy. [ABSTRACT FROM AUTHOR]

Overview: Dollar surge brings mixed consequences The strengthening dollar is now becoming a significant factor for global growth and our forecasts. The tradeweighted dollar is up 2.5% over the last month and over 12% on a year ago., Driving the latest rise are growing expectations of US rate hikes while monetary policy in many other major economies is headed in the opposite direction., The beginning of ECB QE has prompted a further slide in bond yields and the euro - which at 1.06/US$ is on course to fulfill our forecast of near-parity by year-end. Weak data in Japan also raises the chance of a further expansion of QE there later this year., We remain relatively positive about the advanced economies: we forecast G7 GDP growth at 2.2% for 2015 and 2.3% next. This month we have revised up German growth for 2015 to 2.4% - a four-year high., Robust US growth and a strong dollar are good news for the advanced economies. US import volume growth firmed to over 5% on the year in January, while the dollar surge potentially boosts the share of other advanced countries in this growing market., But for the emerging economies the picture is mixed. A stronger US may boost exports, but rising US rates are pulling capital away: there has been a slump in portfolio inflows into emergers in recent months. Emerging growth may also suffer from higher costs of dollar funding and a rising burden of dollar debt as currencies soften - the more so if US rates rise faster than markets expect., Moreover, emergers are also under pressure from a slowing China. Chinese import growth has been weak of late and commodity prices remain under downward pressure. A notable casualty has been Brazil, which we have downgraded again this month - GDP is expected to slump 1.1% this year., Emerging GDP growth overall is expected to slip to 3.7% this year, the lowest since 2009. And excluding China, emerging growth will be only 2.2% - the same as the G7 and the worst performance relative to the advanced economies since 1999. [ABSTRACT FROM AUTHOR]

We argue that financial market development contributed to the rise in the skill premium and residual wage inequality in the United States since the 1980s. We present an endogenous growth model with imperfect credit markets and establish how improving the efficiency of these markets affects modes of production, innovation, and wage dispersion between skilled and unskilled workers. The experience of U.S. states following banking deregulation provides empirical support for our hypothesis. We find that wages of skilled workers increased by between 0.5% and 6.3% following deregulation while those of unskilled workers fell by between 3.5% and 8.7%. Similarly, residual (or within-group) inequality increased; the 90-50 percentile ratio of residuals from a Mincerian wage regression and their standard deviation increased by 4.2% and 1.7%, respectively. [ABSTRACT FROM AUTHOR]

We re-estimate the world technology frontier non-parametrically using a dataset covering OECD country-level data and US state-level data on GDP per worker and the stocks of physical capital, unskilled labour and skilled labour. The auxiliary use of US state-level data significantly reduces the upward bias in cross-country estimates of technical efficiency, and so does allowing for imperfect substitutability between skilled and unskilled labour. We then use our adjusted estimate of the world technology frontier in a series of decompositions of productivity differences and sources of economic growth in the OECD in 1970-2000, including also 'appropriate technology vs. efficiency' decompositions. [ABSTRACT FROM AUTHOR]

For many citizens and policymakers, the empirical relationship between economic growth and biodiversity conservation has not been sufficiently established for purposes of identifying the types of economic policies amenable to biodiversity conservation. Some think economic growth conflicts with biodiversity conservation; others think economic growth conduces biodiversity conservation. With panel data from 1997-2011, encompassing US continental states, we developed a series of statistical models to investigate the relationships among species endangerment, human population, and economic growth as indicated by GDP and per capita GDP. Species endangerment is highly correlated with population and GDP, and per capita GDP is a significant regressor of species endangerment. Across US continental states, competitive exclusion of non-human species occurs via human economic growth and population growth. [ABSTRACT FROM AUTHOR]

The current debate over China's rise and the future of international primacy is polarized between two prevalent views: one foresees China becoming the world's largest economy and taking over the position of international primacy from the United States, whereas the other believes that the Chinese economy will falter as a result of structural imbalances and China will not become a superpower. Both predictions miss the mark. This study argues that notwithstanding the political will to rebalance the economy, China will continue to follow an investment-intensive growth path, and despite the structural imbalances, this path will still be able to lead to Chinese economic primacy. But sheer economic size is not a good indicator of hard power. Using an organic combination of wealth and productivity as an indicator of hard power, the article shows how close the power competition between China and the United States will likely be and that Beijing may not be able to surpass Washington as a superpower. [ABSTRACT FROM AUTHOR]

Trade openness, popularly measured as ( X + M)/ GDP in the hundreds of studies published to date, consistently considers the world's biggest trading countries such as the USA, the UK, Japan and Germany to be closed economies, irrespective of the data set used. This study suggests a composite trade share measure that more completely reflects reality by combining two important dimensions of trade openness: trade share and the relative importance of a country's trade level to total world trade. Robustness tests support the new proposed measure in lieu of the conventional measure of openness and suggest that the latter may not only be incomplete but may also overstate the impact of trade on such things as income and the environment. [ABSTRACT FROM AUTHOR]

We provide new evidence on patterns of structural change in advanced economies, reconsidering the stylised facts put forward by , , and . Since 1980, the services sector has overwhelmingly predominated in the economic activity of the European Union, Japan, and the US, but there is substantial heterogeneity among services. Personal, finance, and business services have low productivity growth and increasing shares in employment and GDP. By contrast, shares of distribution services are constant, and productivity growth is rapid. We find that the labour share in value-added is declining, while the use of ICT capital and skilled labour is increasing in all sectors and regions. [ABSTRACT FROM AUTHOR]

We reconsider the out-of-sample forecasting ability of a large number of financial variables with respect to real output growth over the 1985:1-1999:4 period We show that models including financial variables display almost no forecasting ability relative to an autoregressive benchmark model over this period according to a mean squared forecast error metric. However, tests based on forecast encompassing indicate that many financial variables do, in fact, contain information that is useful for forecasting real output growth over the 1985:1-1999:4 out-of-sample period. Our results suggest that the extant literature exaggerates the demise of the forecasting power of financial variables with respect to real activity since the mid-1980s. [ABSTRACT FROM AUTHOR]

Mangroves line one quarter of the world's tropical coastlines, and approximately 117 countries and territories have mangrove resources within their borders. Although over recent years mangrove deforestation has occurred at a phenomenal rate worldwide, there have been few economic studies of the underlying causes. The article attempts such an analysis and particularly examines the role of economic development, with specific reference to those activities that may result in mangrove deforestation, in determining the area of mangrove left within a country. The article develops a model of economic activity and mangrove conversion. From this model, a relationship is established between remaining mangrove area, economic activity, and other important causative factors. The mangrove area relationship is estimated empirically for a cross-section of 89 countries. Results show that shrimp aquaculture and agriculture are significantly associated with mangrove loss across all countries, whereas the higher the level of GDP per capita the more mangrove area remains. The number of protected areas, length of coastline and political stability were also important in determining the remaining mangrove area of a country. [ABSTRACT FROM AUTHOR]